AT&T Inc.’s share price up, close to finalizing a 50-billion-dollar acquisition of DirecTV to expand reach

People with knowledge of the process reported that AT&T Inc. is now in advanced negotiations to take over DirecTV in a cash-and-stock deal estimated to about 50 billion dollars. The company is said to be seeking consolidation following the steps of other American TV, Internet and wireless providers. According to the people familiar with the matter, the two companies could reach an agreement in two weeks or even sooner.

The negotiations between AT&T Inc. and DirecTV were not quite steady for some time, but they have made a progress recently. Nevertheless, there is nothing certain about the deal between the two companies, which have previously approached towards an agreement, but the talks collapsed. Moreover, an eventual acquisition would have to be approved by local regulators, which are supposed to give their permission for further consolidation of the pay-TV industry.

As reported by Bloomberg, one of the analysts working with Recon Analytics – Mr. Roger Entner commented on the situation: “If regulators let Comcast buy Time Warner Cable, there’s no reason they wouldn’t let AT&T buy DirecTV. They have to see it as part of a holistic market.”

The market capitalization of DirecTV is estimated to 44.54 billion dollars, while the value implied by AT&T is slightly below 50 billion dollars. An eventual acquisition of DirecTV would be beneficial to AT&T, which would get an opportunity to expand its reach via a national satellite-TV provider. Currently, the company offers phone, wireless and broadband Internet services to its subscribers.

The cash flow of AT&T is also expected to be increased if the acquisition is finalized and would also provide it with the opportunity to invest more money in its broadband Internet division.

Mr. Entner also commented on the beneficial influence that an eventual deal would have on the company: “With DirecTV they are getting a national TV presence – they can sell TV with wireless nationwide. AT&T has increasingly been breaking out of their 22-state landline footprint. They sell wireless, they started selling home security and they could add TV to that package.”

AT&T Inc. was 0.36% up to close at 36.57 dollars per share yesterday, marking a one-year change of -2.11%. According to the information published on CNN Money, the 24 analysts offering 12-month price forecasts for AT&T Inc. have a median target of 35.00, with a high estimate of 42.00 and a low estimate of 25.00. The median estimate represents a +4.29% decrease from the last price of 36.57.